NEW DELHI: India’s renewable energy capacity, which primarily includes electricity from solar and wind, has registered 123% growth in capacity addition in the first five months of the current fiscal year (FY2025-26), reaching 20.1 gigawatts (GW). According to an ICRA report, this is up from 9.0 GW in the same period last year.
The report mentioned that this growth, driven by a large project pipeline and favourable market conditions, positions the sector to scale up to over 35.0 GW in FY2026. The growth momentum follows a strong performance in FY2025, where capacity addition rose to 28.7 GW from 18.5 GW in FY2024.
Despite the strong pipeline, the report notes a significant slowdown in bidding activity, with only 3.4 GW auctioned in the first half of FY2026. This is attributed to delays in the signing of Power Sale Agreements (PSAs) by bidding agencies with state distribution utilities, which in turn holds up the finalization of Power Purchase Agreements (PPAs) with winning developers. The timely execution of these agreements, along with the augmentation of transmission infrastructure, is identified as critical to sustaining the current growth trajectory.
As per the report, the recent rationalisation of Goods and Services Tax (GST) rates for solar PV modules and wind turbine generators, which have been reduced from 12% to 5%, is expected to lower the capital cost for solar and wind power projects by about 5%. This is projected to reduce the cost of generation by 10 paise per unit for solar power and by 15-17 paise per unit for wind power.
According to the report, the quoted bid tariffs for Battery Energy Storage Systems (BESS) have seen a significant decline, improving the cost economics for hybrid projects. ICRA expects the energy storage capacity requirement to reach 50 GW by 2030, to be met through a mix of BESS and pumped storage hydro projects.
Regarding module prices, while those for imported N-type modules remained low at about 8-9 cents/watt in August 2025, prices in the Indian market were higher at 15-17 cents/watt due to the imposition of the Approved List of Modules and Manufacturers (ALMM). The upcoming imposition of ALMM on solar cells from June 2026 is likely to cause module prices to increase in FY2027, a factor developers must account for in future bids.
The report also notes that the recent imposition of 50% tariffs by the US on India is expected to adversely affect the competitiveness and export volumes of Indian original equipment manufacturers.